Program Base Acre Reallocation Option
Carl Zulauf, Ohio State University, and Nick Paulson, Jonathan Coppess, and Gary Schnitkey,
University of Illinois at Urbana-Champaign
November 2014
This article discusses the one-time option Farm Service Agency (FSA) farm owners have to reallocate,
but not increase, program base acres. The decision is important because both Agriculture Risk
Coverage (ARC) and Price Loss Coverage (PLC) pay on base, not planted, acres.
Background: ARC-CO (ARC-county) and PLC make payments for a covered program crop on 85%
of the covered crop’s base acres on a FSA farm. Payment acre determination is more complex for
ARC-IC (ARC individual) but in general equals 65% of total base acres on an ARC-IC farm unit.
Decision Framework
► Decision rests with the owner of a FSA farm.
► Decision applies to all covered program crops on a FSA farm.
► Decision takes effect with the 2014 crop year.
► Total base acres on a FSA farm cannot increase nor decrease. They can only be reallocated.
► Program base acre reallocation options are:
1. retain base acres as of 9/30/2013, including generic (former cotton) base acres which cannot
be reallocated, OR
2. reallocate 9/30/2013 base acres, other than generic base acres, according to the ratio of (a)
the 4-year average for the 2009-2012 crop years of a covered crop’s acres planted or
prevented from planting on the FSA farm to (b) the 4-year average for the 2009-2012 crop
years of all covered crops’ acres planted or prevented from planting on the FSA farm.
► The default option (no decision is made) is current base acres, including generic base acres.
► The crop must have been planted for harvest, grazing, haying, silage, or other similar purposes.
► All years are included regardless of whether or not acres were planted to a covered crop. For
example if corn and soybeans are rotated every year on the FSA farm, each year that corn is
planted there is 0 acres for soybeans and vice versa.
► Prevented planting must be due to conditions beyond the producer’s control, including drought,
flood, and other natural disasters.
► Base acres can include double cropped acres but only if the Secretary of Agriculture has
determined that double cropping is an established practice in the area. In other areas, if 2 covered
crops were planted on the same acre in the same year, the owner may elect 1 but not both covered
crops for inclusion in calculating the 4-year average of base acres.
► Generic base acres are automatically retained but cannot be reallocated.
► For a FSA farm, total, including generic, base acres, cannot exceed the FSA farm’s actual cropland
acres (unless double-cropping is an approved practice).
► An example in Table 1 includes most situations discussed above. Total base acres does not
change (100 acres in both options) even though land was planted to a non-covered crop (alfalfa).
The decision is whether to reallocate base acres from oats and wheat to soybeans.
► The base acre reallocation decision is independent of the payment yield update decision. Base
acres can be reallocated without updating payment yield, and vice versa.
FSA Farm vs. Operational Farm
► A FSA farm is generally determined on the basis of ownership and thus can differ notably from a
farm operator’s farm. To illustrate, in 2012, 1,267,982 farms had corn base acres. In contrast, the
2012 Census of Agriculture reports that only 348,530 farms harvested corn. See Figures 1 and 2
for similar information on other crops. Other than peanuts, which has more farms harvesting the
crop; the number of operational farms range from 7.5% (grain sorghum) to 30% (soybeans) of the
number of farms with base acres for the crops in Figures 1 and 2.
► The preceding point implies that the average FSA farm is notably smaller than the average farm
operation, except for peanuts. For example, the average corn base per FSA farm with corn base
is 66 acres (84.3 million corn base acres divided by 1.3 million FSA farms with corn base (see
Figures 3 and 1). In contrast, acres planted to corn per farm harvesting corn averages 279 (97.2
million planted corn acres divided by 0.35 million farms harvesting corn (see Figures 4 and 2).
► The smaller size of FSA farms, rotation of crops, and changing mix of crops in the U.S. (more corn
and soybeans) mean reallocated base acres can differ notably from current base acres.
Summary Observations
► The potential for a notable change in base acres, the use of base acres to calculate ARC and PLC
payments, and lower prices mean the base acre decision is important. For some FSA farms the
base acre reallocation reallocation decision will be as important if not more important than the
program choice decision.
► Comparing base with planted acres by crop in 2012 suggests the most common base reallocation
decision will involve whether to increase corn and soybean base acres at the expense of grain
sorghum, barley, and especially wheat base acres (compare Figures 3 and 4). In 2012, base
acres were 18 million higher than planted acres for wheat but 12 and 27 million less than planted
acres for corn and soybeans, respectively.
► The reallocation of base acres will revolve around which of 3 likely decision criteria the FSA farm
owner brings to the decision:
a. Choose the set of program acres closest to the expected planted acres on the FSA farm over
the 2015-2018 crop years. This objective essentially seeks to minimize the financial risk
associated with planting decisions.
b. Choose the set of program acres that differs the most from planted acres. This objective is a
type of risk minimization where farm program payments are viewed as a separate source of
income disconnected from planted acres.
c. Choose the set of program acres that maximizes government payments. Economists have
found that this perspective has generally driven past farm program decisions. However, there
is a catch this time: ARC and PLC payments are more uncertain than most past farm program
payments. Thus, the ability to maximize government payments will depend upon the FSA farm
owner’s ability to forecast accurately yield and price over the 2015 through 2018 crop years.
Available evidence is that few have the ability to accurately predict future prices and thus it
may be hard to achieve this objective.
■
There is no right or wrong objective; but it is important to be honest about the objective.
This publication is also available at http://ohioagmanager.osu.edu
Addendum: Other Base Acre Provisions That Might Affect Base Acre Reallocation Decision
► A FSA farm with 10 or fewer total base acres is generally not eligible to receive ARC or PLC
payments. This provision does not apply for a socially disadvantaged or a limited resource farmer
or rancher.
► The limit on planting fruits, vegetables (other than mung beans and pulse crops), or wild rice on
base acres is modified. Under the 2014 farm bill, payment acres on a FSA farm are reduced in
any crop year if these crops are planted on more than 15% of base acres for farms in ARC-CO or
PLC, or on more than 35% of base acre for farms in ARC-IC. Payment acres are the base acres
upon which payments are received, such as 85% of base acres for ARC-CO and PLC. This
provision provides some flexibility to plant non-program crops on the share of base acres that do
not receive any program payment but does not provide any subsidy for planting the non-program
crops on payment acres. This provision does not alter the base acres on an FSA farm.
► Base acres, including generic (former cotton) base acres, generally are adjusted when entering or
exiting Conservation Reserve Program contracts.
► The Secretary of Agriculture is to proportionately reduce base acres, including generic (former
cotton) base acres, on a FSA farm for which land has been subdivided and developed for multiple
residential units or other nonfarm uses if the land is unlikely to return to agricultural use and unless
the owner can demonstrate that the land is or will be in agricultural use.
Background on Current Base Acres
Current counter-cyclical base acres largely reflect average acres planted or considered planted either
during 1991 through 1995 or 1998 through 2001. This choice was given farmers by the 2002 farm bill.
For an extensive discussion of the 2002 farm bill base acre decision, see C. Edwin Young, David W.
Skully, Paul C. Westcott, and Linwood Hoffman, “Economic Analysis of Base Acre and Payment Yield
Designations Under the 2002 U.S. Farm Act,” Economic Research Report ERR-12, September 2005,
available at http://webarchives.cdlib.org/sw15d8pg7m/http://ers.usda.gov/Publications/err12/
Table 1. Example Calculation of Reallocated Base Acres
Crop
Base
Acres
9/30/2013
Crop
History
2009
Crop
History
2010
Crop
History
2011
Crop
History
2012
20
20
20
20
Average
Planting
2009-12
Reallocation
Share
Reallocated
Base Acre
Option
not
applicable
50%
not
applicable
50
Alfalfa
(not a covered crop)
Corn
50
50
40
30
40
not
applicable
40.0
Oats
10
0
0
0
0
0.0
0%
0
Soybeans
Wheat
Total covered crops
30
10
100
30
0
100
32
8
100
50
0
100
32
8
100
36.0
4.0
80.0
45%
5%
100%
45
5
100